The Reserve Bank of India (RBI) has issued show-cause notice to the Baghat Urban Cooperative Bank, Solan, for cancelling its licence and proceeding with liquidation after grave deficiencies were noticed in banking operations contravening statutory RBI norms.
A 30-day period has been granted to the bank in its June 15 notice to explain its position, failing which the RBI will proceed with liquidation. The development has dealt a severe blow to the 80,000 depositors and 11,000 shareholders who have been facing financial curbs since October 2025.
Consequent to this development, the Registrar Cooperative Societies (RCS), Shimla, suspended the bank’s Chairman, Vice-Chairman and six Directors in orders issued last evening and appointed Neeraj Sood as an administrator to manage the affairs of the bank.
A show-cause notice has also been issued by the RCS to all nine members of the Board of Management (BoM) under Section 37 of the HP Cooperative Societies Act, 1968. The bank — operational since May 9, 1997 — has been constantly under the RBI lens since 2017.
The loaning facility was put on hold in April 2021 after the apex bank imposed a penalty owing to financial inadequacies.
The BoM comprises Arun Sharma (Chairman), Kiran Kishore Thakur (Vice-Chairman) and Directors Sunder Singh Thakur, Sanjeev Kumar, Amar Singh, Krishan Lal Grover, Kalpana Thakur and Gagan Chauhan, an RCS-appointee Director.
Though a surcharge inquiry was underway in the bank by the assistant registrar cooperative societies since March, it was yet to fix the accountability of the staff and board members responsible for grave irregularities, illegalities and lapses in disbursing unsecure loans.
In a strongly worded letter, the RCS pointed out persistent and serious irregularities in the conduct of the bank which violated the statutory provisions and guidelines issued by the apex bank. “Despite warnings of strict penal action, the board failed to devise a detailed strategy and concrete action plan to improve its precarious financial position and demonstrate substantial improvement,” averred the official.
It also noted that “Persistent non-compliance of the bank in attaining minimum regulatory thresholds for Capital-to-Risk Weighted Assets Ratio (-10.46 ), Credit Deposit Ratio (69.76) and net Non-Performing Assets per cent (7.94) by March 31 prompted the RBI to impose comprehensive restrictions on operations of the bank from October 8, 2025.”
These directions prohibited grant/renewal of loans/advances, investments, incurrence of liabilities (including borrowings), acceptance of fresh deposits and disbursal of payments without prior RBI approval. These directions were initially operative for six months but upon review, the RBI found no improvement. But keeping public interest in mind, it extended the restrictions for a further three months up to July 8.
“The bank’s financial condition, however, saw no substantial improvement which eroded stakeholder confidence as the board has utterly failed to restore regulatory compliance, rendering normal banking operations untenable,” observed the RCS.
While warning the bank of serious consequences, the RCS also pointed out that ”continued weak performance may render the bank liable to cancellation of its banking licence, which could cause substantial loss to approximately 11,000 shareholders and 80,000 depositors and may lead to winding-up proceedings” in its strongly worded notice issued on June 15. The bank’s NPA stands at a precarious Rs 102 crore and CRAR is minus 8, exhibiting financial strain.
